# ASC 720-20: Other Expenses — Insurance Costs Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/720/20/) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:07:18.243Z to 2026-09-10T01:07:45.379Z Record version: sha256:7ade7bff5a158a547fc71757c456a7cfeb025beec76a30bebe401ace04e11bcb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20: Other Expenses — Insurance Costs ### Machine-generated study aids ```json { "summary": "ASC 720-20 tells a policyholder (a noninsurance entity, or an insurer buying coverage outside its core operations) how to account for insurance it purchases, covering three contract types: retroactive contracts, claims-made contracts, and multiple-year retrospectively rated contracts. If a contract does not actually transfer insurance risk, the premium (less amounts retained by the insurer) is accounted for as a deposit under Subtopic 340-30 (720-20-25-1). For retroactive coverage of already-incurred liabilities, the premium is expensed immediately, a receivable is recorded for expected recoveries, and any excess of receivable over premium is a deferred gain amortized over the recovery period (720-20-25-3 through 25-4; 720-20-35-2).", "key_points": [ "If, regardless of form, an insurance contract does not indemnify the insured against loss or liability, the premium paid less the amount retained by the insurer is accounted for as a deposit under Subtopic 340-30 (720-20-25-1; 720-20-25-2).", "Purchased retroactive insurance is accounted for like retroactive reinsurance under Subtopic 944-605: the premium is expensed immediately and a receivable is established for expected recoveries related to the insured event (720-20-25-3).", "Any excess of the receivable over the amount paid is a deferred gain—immediate gain recognition and derecognition of the liability are prohibited because the liability is not extinguished and offsetting is not permitted under 210-20-45-1 (720-20-25-4); the deferred gain is amortized using the interest method, or on a recoveries-to-total-recoveries basis if amounts and timing cannot be reasonably estimated (720-20-35-2).", "A claims-made policy that covers specific known claims reportable before the policy period (asserted claims, known unasserted claims, or known events that might result in a claim) contains a retroactive provision; the retroactive and prospective provisions must be accounted for separately if practicable, and if not practicable the entire policy is accounted for as retroactive (720-20-25-6 through 25-8), with indicators of a purely prospective policy listed in 720-20-25-10.", "Prospective claims-made policies are accounted for by recognizing the premium as prepaid expense and estimating an annual expense equal to premium plus the change in the incurred-but-not-reported liability and the change in the related insurance recoverable, allocated to interim periods, with unusual claims recognized discretely when incurred (720-20-35-3 through 35-5; 720-20-35-9 through 35-10).", "Insured entities must still accrue a liability for probable and reasonably estimable incurred but not reported claims under 450-20-25-2 (720-20-25-14), and prepaid insurance and insurance receivables may not be offset against those liabilities unless 210-20-45-1 is met (720-20-45-1).", "For a multiple-year retrospectively rated contract accounted for as insurance, the insured recognizes a liability (or asset) for consideration payable to (or by) the insurer that would not exist absent experience under the contract, measured using a with-and-without method excluding future experience (720-20-25-15; 720-20-30-3; termination alternatives in 720-20-30-4)." ], "categories": [ "Recognition", "Subsequent measurement", "Presentation", "Contingencies and guarantees" ], "audience_level": "intermediate", "student_note": "This is the policyholder's side of insurance accounting—easy to confuse with Topic 944, which governs insurers. The classic trap is assuming that buying insurance for an already-recognized liability lets you write off the liability and book a gain; instead you expense the premium, record a receivable, defer any gain, and keep the gross liability on the balance sheet.", "related_topics": [ "340-30", "944-605", "944-20", "450-20", "410-30", "210-20" ], "key_concepts": [ "retroactive insurance contract", "claims-made policy", "deferred gain amortization", "deposit accounting", "incurred but not reported liability", "insurance recoverable", "multiple-year retrospectively rated contract", "with-and-without method" ] } ``` Source downloaded (UTC): 2026-09-10T01:07:18.243Z to 2026-09-10T01:07:18.243Z Record version: sha256:ffda97179e020b5e63aa6aac80d9c1f5cde9f597e315627317d0b1a10382d126 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/720/20/#00-status) SEC content: no ##### [720-20-00-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:18.243Z to 2026-09-10T01:07:18.243Z Record version: sha256:04644f1c25cc4d2820357cb1683aa4b6cc61e089c45917f18c58ac3e912efb08 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
ReinsuranceAddedAccounting Standards Update No. 2016-1912/14/2016
720-20-05-3AmendedAccounting Standards Update No. 2016-1912/14/2016
720-20-05-5AmendedMaintenance Update 2020-18 (PDF)11/25/2020
720-20-15-6AmendedAccounting Standards Update No. 2016-1912/14/2016
720-20-15-8AmendedAccounting Standards Update No. 2016-1912/14/2016
720-20-25-1AmendedAccounting Standards Update No. 2016-1912/14/2016
720-20-30-2AmendedMaintenance Update 2020-18 (PDF)11/25/2020
Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:ba7f18a3047d63ec71e9fb0dcb664d4604e9b6853d370fbd65fbed76be750a1b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/720/20/#05-overview-and-background) SEC content: no ##### [720-20-05-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:c3c39e33ff8cae5a2b83b268dae1f9f60c475d312cbc68001b6401c24937f34a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on three types of insurance contracts. The guidance for each is presented in the following Subsections: 1. a Retroactive contracts 2. b Claims-made contracts 3. c Multiple-year retrospectively rated contracts. ##### [720-20-05-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:2ab80a83aef1f197ce3912b92186fa45da7ee2b4cedabee0b620f80d9abfcb78 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In addition, guidance on deposit accounting resulting from contracts that do not transfer insurance risk is contained in the General Subsections of this Subtopic and in Subtopic 340-30. Operations in certain industries may be subject to such high risks that insurance is unavailable or is available only at what is considered to be a prohibitively high cost. Some entities in those industries have pooled their risks by forming mutual insurance entities in which they retain an equity interest and to which they pay insurance premiums. For example, some electric utility entities have formed such a mutual insurance entity to insure risks related to nuclear power plants, and some oil entities have formed an entity to insure against risks associated with petroleum exploration and production. Whether the premium paid represents a payment for the transfer of risk or whether it represents merely a deposit will depend on the circumstances surrounding each entity's interest in and insurance arrangement with the mutual insurance entity. An analysis of the contract is required to determine whether risk has been transferred and to what extent. ### Retroactive Contracts ##### [720-20-05-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:3bae801406e6e6ab95294d3bb2b4cda2cd49fe9cdd56d6a02474c6dfb5d383ae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Retroactive Contracts Subsections provide guidance on how an insured entity, including an insurance entity purchasing insurance unrelated to its core insurance operations (for example, manufacturers, retailers, service entities, and financial institutions), should account for a purchased retroactive insurance policy and whether the transaction results in gain recognition (excluding [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") transactions). For example, an entity records a liability of $100 million incurred as a result of a past event in accordance with Subtopic 450-20. The entity then buys an insurance policy for $60 million to cover that liability. ### Claims-Made Contracts ##### [720-20-05-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:3365f1ecdb2192b767248358b01fc5b3479a3ebcd9c1fd7cf3a41569a3ffdce8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Many entities use claims-made policies to satisfy their insurance needs for such coverage as product, directors and officers, and malpractice liabilities. However, entities have been purchasing coverage for a variety of other exposures using a claims-made format. Under a claims-made insurance policy, an entity is insured for any claims reported during the term of the policy, in many cases including those that occurred prior to the policy effective date but after the specified retroactive date. ##### [720-20-05-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:a2743596df59f822750b39902b4469bd80b4c2f61e1085f454cd3ff1497b28d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Generally, entities purchasing a claims-made policy will renew the policy each year. The amount of coverage purchased may change over time to meet current needs (for example, changing risk within the entity) or to respond to the overall environment (for example, the expected settlement costs of the same claim today may cost more than in prior years). When operations cease, the entity generally purchases [tail coverage](https://asc.understandingaccounting.org/glossary/t/#tail-coverage "Insurance designed to cover malpractice claims incurred before, but reported after, cancellation or expiration of a claims-made insurance policy.") to insure itself against any previously unasserted claims. ##### [720-20-05-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:91f83dd4ddecc2c82ccb548d2899b7b2451984936b5fe1be9e8917be42ba9312 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Presuming the entity can renew the claims-made policy each year and can obtain tail coverage when desired, such a strategy effectively converts the claims-made policy into an occurrence-based policy covering the entity for any claims made against it. ##### [720-20-05-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:c910907d5b5143186816f7affbb10d404f27e0043d0709a52fba0bfed88e3422 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entities generally use claims-made coverage because it is the only form of insurance available for certain exposures, particularly exposures for which the occurrence dates may be difficult to determine or for which the occurrence may span a long period of time. Therefore, a claims-made policy mitigates potential coverage disputes because the occurrence date generally is not relevant to the determination of coverage. ##### [720-20-05-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:9f562e7ea0d9fe10e0512449ec9789396441908ebedd0638f5375aa753bd8621 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Also, there may be reduced insurance costs in the first several years of a claims-made policy as compared to an occurrence-based policy. Many entities that purchase claims-made insurance policies have no knowledge of unasserted outstanding claims or, because their liabilities have not met the recognition criteria contained in paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) or in other applicable U.S. generally accepted accounting principles (GAAP), have no recognized liability for claims, including [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") claims. In other situations, however, entities that purchase claims-made insurance policies are aware of potential claims based on a specific incident or incidents or historical experience. In those situations, unasserted claims can be either specifically excluded from or specifically included in the coverage. ### Multiple-Year Retrospectively Rated Contracts ##### [720-20-05-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:9a1387fd8b1da809c00f94d4d1eaaf82252428ca4101741a17df3272ebd6b25f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity (for example, a manufacturer, a retailer, a service entity, or a financial entity) may enter into a multiple-year retrospectively rated contract with an insurance entity. These contracts may cover various types of exposures such as product and environmental liability risks. A critical feature of these contracts is that part or all of the retrospective rating provision is obligatory such that the retrospective rating provision creates for each party to the contract future rights and obligations as a result of past events. ##### [720-20-05-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-05-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:20.723Z to 2026-09-10T01:07:20.723Z Record version: sha256:be692a0677c725b48ec5c22442ff3100ade6bdeadc779e9281455c0904d4b49d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Such contracts include a retrospective rating provision that provides for any of the following based on contract experience: 1. a Changes in the amount or timing of future contractual cash flows, including premium adjustments, settlement adjustments, or refunds to the noninsurance entity 2. b Changes in the contract's future coverage. Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:bc61da2cecd989664a5fbaf3d83083ae57d319e6a4fa012cd2f6687f5cb52849 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/720/20/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [720-20-15-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:b09d24d4d06f40716d2087b5f785c5d65e449098dc0087daf9656de1b7f56720 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsection of this Section establishes the pervasive scope for this Subtopic, with specific exceptions noted in the other Subsections of this Section. #### Entities ##### [720-20-15-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:f2d09d8c7c9c82f2244abf222b643204d2ffbbe01f75a983ede73aba974ba908 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. ### Retroactive Contracts #### Overall Guidance ##### [720-20-15-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:aa42395ae7f26b9988df19c7594e049a7723e44a6a59d37e198d01e48346faa2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Retroactive Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Subtopic, see paragraph [720-20-15-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-1), with specific entity and transaction qualifications noted below. #### Entities ##### [720-20-15-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:a4ab70952e208333930bc6079794a8df9c6d608ba526188019ec52541637a26e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Retroactive Contracts Subsections applies to all entities that enter into retroactive insurance contracts. #### Transactions ##### [720-20-15-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:16f0cb07f67b1dd70a069e301a834f93382140e0d4973587ad84ba9c7baf9de6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Retroactive Contracts Subsections applies to the following transactions and activities: 1. a Those that meet the indemnification against loss or liability conditions of Section [720-20-25-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-1) 2. b Those that provide indemnification against loss or liability relating to liabilities that have been incurred as a result of a past event, for example, environmental remediation liabilities (see Subtopic 410-30). ##### [720-20-15-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:17e71650a96739e5c6922aed4b6423941826b1ca49d35f4c3216ae1dcd8987f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Retroactive Contracts Subsections does not apply to the following transactions and activities: 1. a Those that legally extinguish the entity's liability 2. b [Reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") transactions (see Subtopic 944-20 for guidance on the accounting by insurance entities for reinsurance contracts). ### Claims-Made Contracts #### Overall Guidance ##### [720-20-15-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:8789686d28516e1c940f21a4c08fcbf75bfdf4141466c10efd77e24a48e54000 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Claims-Made Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Subtopic, see paragraph [720-20-15-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-1), with specific transaction exceptions noted below. #### Transactions ##### [720-20-15-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:66a9581ac02a381ccba6b484408dc843ed10a8bd5352efaf0f4f66bd2aeaeb3b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Claims-Made Contracts Subsections does not apply to [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") transactions (see the Reinsurance Subsections of Topic 944 for guidance on the accounting by insurance entities for reinsurance contracts). ### Multiple-Year Retrospectively Rated Contracts #### Overall Guidance ##### [720-20-15-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:ea53a2375880cd06556ec2e139a409ed9c96493d06abaef7f465add03b085b51 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Multiple-Year Retrospectively Rated Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Subtopic, see paragraph [720-20-15-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-1), with specific transaction exceptions noted below. #### Transactions ##### [720-20-15-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-15-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:22.977Z to 2026-09-10T01:07:22.977Z Record version: sha256:07b75bdd1d182a0f2c0422d726205626ff6399b59969904dd14f53e86960bda8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Multiple-Year Retrospectively Rated Contracts Subsections does not apply to the following transactions and activities: 1. a A retrospectively rated insurance contract that is not a multiple-year contract or that could be cancelled by either party without further obligation. Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:eb70b47ccbe1892880dd74d8d77caaa92ff7af38d756cd7e21aa4fb188eb5c48 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/720/20/#25-recognition) SEC content: no ##### [720-20-25-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:0b5d129b06bb71e968bb08b93d7737dd511a38cfeec0ba46e389a8a0298c8e70 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. To the extent that an insurance contract or [reinsurance](https://asc.understandingaccounting.org/glossary/r/#reinsurance "A transaction in which a reinsurer (assuming entity), for a consideration (premium), assumes all or part of a risk undertaken originally by another insurer (ceding entity). For indemnity reinsurance, the legal rights of the insured are not affected by the reinsurance transaction and the insurance entity issuing the insurance contract remains liable to the insured for payment of policy benefits. Assumption or novation reinsurance contracts that are legal replacements of one insurer by another extinguish the ceding entity's liability to the policyholder.") contract does not, despite its form, provide for indemnification of the insured or the ceding entity by the insurer or reinsurer against loss or liability, the premium paid less the amount of the premium to be retained by the insurer or reinsurer shall be accounted for as a deposit by the insured or the ceding entity. Those contracts may be structured in various ways, but if, regardless of form, their substance is that all or part of the premium paid by the insured or the ceding entity is a deposit, it shall be accounted for as such. ##### [720-20-25-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:eaa32987671a42b18a78e406f0ee110dc5104d8c1a7945039a6488beea61c78b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Subtopic 340-30 for guidance on deposit accounting. In addition, the preceding paragraph requires that an entity determine whether insurance risk has been transferred through an insurance contract; entities may find the conditions in Section 944-20-15 useful in assessing whether an insurance contract transfers risk. ### Retroactive Contracts #### Purchase of a Retroactive Insurance Policy ##### [720-20-25-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:28eab03aad6670a77070d7cf4ecb8554b6f3b07cbd35ee686f4c66b58f28c3eb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Notwithstanding that Topic 944 applies only to insurance entities, purchased retroactive insurance contracts that indemnify the insured shall be accounted for in a manner similar to the manner in which retroactive reinsurance contracts are accounted for under Subtopic 944-605. The guidance in that Subtopic shall be applied, as appropriate, based on the facts and circumstances of the particular transaction. That is, amounts paid for retroactive insurance shall be expensed immediately. Simultaneously, a receivable shall be established for the expected recoveries related to the underlying insured event. ##### [720-20-25-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:b06484ac90b9207549b6a8d5aac3720039931ea73cc4f5ff821b21d4fc071e8f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the receivable established exceeds the amounts paid for the insurance, the resulting gain is deferred. Immediate gain recognition and liability derecognition are not appropriate because the liability has not been extinguished (the entity is not entirely relieved of its obligation). Additionally, the liability incurred as a result of a past insurable event and amounts receivable under the insurance contract do not meet the criteria for offsetting under paragraph [210-20-45-1](https://asc.understandingaccounting.org/asc/210/20/#210-20-45-1). ##### [720-20-25-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:36758b7b79057ffb0cbe7994b3d65806fd034834a1b51c9d46d1121d2ad4e02e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the purchased insurance contract includes coverage for legal and other costs, the accounting for those costs shall be consistent between the asset and the liability. That is, if the entity's accounting policy is to accrue legal and other costs, then the insurance receivable shall reflect those costs if they are covered under the terms of the insurance policy. If an entity's accounting policy is not to accrue for those costs, then the insurance receivable shall not reflect those costs on an accrual basis. ### Claims-Made Contracts #### Claims-Made Insurance Policies That Represent Purchased Retroactive Insurance Contracts ##### [720-20-25-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:dacab776543fe70e560c9e591a25610193b8d589c010626b7eb0d9a473c64287 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A claims-made insurance policy contains a retroactive provision if it provides coverage for specific known claims that were reportable prior to the policy period. Regardless of whether the insured has recognized a loss contingency for those claims, specific known claims that were reportable (by the insured entity to the insurance entity) would encompass: 1. a Asserted claims 2. b Known unasserted claims 3. c Any known previous event or circumstance that might result in a specific claim (whether asserted or unasserted). Such claims include those that were not reported by the insured to the insurance entity, but would have been reportable to the insurance entity had a claims-made policy been in place in a prior period. ##### [720-20-25-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:f003a5ebed56672e055473fff8d5143b0db0e6516e5483c9e360941c2c25f887 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a claims-made insurance policy contains a retroactive provision, the retroactive and prospective provisions of the policy shall be accounted for separately, if practicable. ##### [720-20-25-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:8942a1f76dcdbc2d209f34f509f1f0a0d4d98a0fb52b57749a33bff039b39cbc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If it is not practicable to separate the retroactive and prospective provisions, the claims-made insurance policy shall be accounted for entirely as a retroactive contract in accordance with Subtopic 944-605. A claims-made insurance policy that contains no retroactive provisions should be accounted for on a prospective basis as described in the [Claims-Made Contracts Subsection](https://asc.understandingaccounting.org/asc/720/20/#35-subsequent-measurement) of Section 720-20-35 and in Examples 4-5 (see paragraphs [720-20-55-13 through 55-20](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-13) ). ##### [720-20-25-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:db0b7a2e129767e29dade64739407a9037268b35b8f670a3b6313fdb6161af5f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [944-20-15-34B](https://asc.understandingaccounting.org/asc/944/20/#944-20-15-34B) states that in claims-made insurance, the insured event is the reporting to the insurer, within the period specified by the policy, of a claim for a loss covered by the insurance contract. Accordingly, a prospective claims-made insurance policy only covers claims for losses reportable to the insurer during the policy term. A retroactive provision provides coverage for known claims, for which the underlying event had occurred and the incident would have been reportable prior to the effective date of the claims-made policy. A recognized liability for [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") claims generally would not be determinative in concluding that a claims-made insurance policy either does or does not contain a retroactive provision. ##### [720-20-25-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:044ea2dd48135d220404254098a73af654b7e95cd4ed94380eb3a5e8f299a43d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All relevant facts and circumstances should be considered in evaluating whether a claims-made policy contains a retroactive provision. The following are indicators that a claims-made insurance policy does not contain a retroactive provision (that is, it does not provide coverage for previously reportable claims) and, therefore, shall be accounted for on a prospective basis. No one indicator is determinative in this evaluation; the determination must be made upon the specific facts and circumstances: 1. a The insured consistently purchases claims-made insurance policies as part of its risk management program for the specific type of risk being insured, and [tail coverage](https://asc.understandingaccounting.org/glossary/t/#tail-coverage "Insurance designed to cover malpractice claims incurred before, but reported after, cancellation or expiration of a claims-made insurance policy.") for both prior periods and prior policies is readily available and not excessively priced as compared to tail coverage offered to similar entities that do not contain retroactive provisions. 2. b The claims-made insurance policy is responsive to unknown risks for a finite or limited period of time, as evidenced by the fact that all of the following conditions exist: 1. 1 The type of risk being insured is inherently short-tailed (that is, the claims are incurred during the policy period and paid out in their entirety shortly after the end of the policy period). 2. 2 The policy term is for a limited period of time (for example, one-year coverage). 3. 3 Claims-made coverage is the most readily available coverage for this type of insurance risk. 4. 4 The occurrence date of the type of risk covered by the policy is unclear (that is, the causal event that gives rise to an insured claim is difficult to determine). Such a lack of identification creates difficulty in assessing risk for an entity considering whether to self-insure its insurance risk (for example, a manufacturing entity may be completely unaware of the potential health hazards attributable to its core products and may want to protect itself in case a by-product of its production process becomes the next asbestos). 3. c The claims-made insurance policy contains an unambiguous trigger indicating that a claim is covered by the policy. That contract trigger should not be subject to interpretation, negotiation, or manipulation. An example of an unambiguous trigger that indicates that a claim is covered by a claims-made insurance policy would include both of the following provisions: 1. 1 The insured notifies the insurance carrier during the policy term that a claim has been asserted or that an incident has occurred. 2. 2 The insured must represent that it was not aware of any such incident when the claims-made policy was purchased. 4. d The premium charged for the claims-made insurance policy is not significantly in excess of the premium that would be charged for a claims-made insurance policy that could be purchased by a similar entity with similar insurance risks and no knowledge of any circumstances or events that would result in any claims, excluding any anticipated amounts for a typical number of claims for which the insured is not aware to have specifically occurred but that it expects would be reported (incurred but not reported). 5. e The insurer may base the premium for the claims-made insurance policy on estimates and predictions that are based on the past experience of the insured but the premium is not based on settlement estimates of specific, known events that are expected to be recovered under the policy. 6. f The premium charged for the policy in the current year is not significantly in excess of that charged in previous years, other than for increases in the amount or type of coverage. An anticipated increase in premiums that is expected to occur because the insured entity is advancing toward the mature stage of premiums for claims-made insurance would not be considered in making that determination. 7. g The claims-made insurance policy is primarily intended to cover insurance risk and is not a financing arrangement. Claims-made insurance policies that are intended to cover insurance risk typically include features such as: 1. 1 An absence of adjustment features based on experience 2. 2 Coverage of the ultimate loss from the claim, once made, regardless of period of settlement. 8. h If the claims-made insurance policy has a specified retroactive date prior to the inception of the claims-made relationship with the insurer, the period from that specified retroactive date to the inception of the claims-made relationship with that insurer is either short or covered by other insurance policies. ##### [720-20-25-11](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:d0899bdbf1aa87f0c249c1691e19dc07eefec1cb4ce398029b12fa880a6d42d7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although the guidance in the [Retroactive Contracts Subsection](https://asc.understandingaccounting.org/asc/720/20/#25-recognition) of this Section (see paragraph [720-20-25-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-3)) applies to situations in which the insured entity uses a claims-made insurance policy to finance known losses (that is, when the insurance contract was purchased in order to provide insurance coverage for specific, known events that occurred or were reportable before the inception of the contract), the guidance in that paragraph does not preclude prospective accounting for those claims-made insurance policies or portions of those policies that contain only prospective provisions. ##### [720-20-25-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:cc202d91da5d127e34bc9d65d5bf7964a113f0d97e8bf5121ddc28818992ff5e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An insured entity may, for various reasons, contemporaneously enter into multiple claims-made insurance policy contracts. In those circumstances, an entity should consider whether those insurance contracts should be combined in order to determine the appropriate accounting treatment. The guidance contained in Section [944-20-15](https://asc.understandingaccounting.org/asc/944/20/#15-scope-and-scope-exceptions) is helpful in those instances. ##### [720-20-25-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:6b01a71de8fe813d480211017c31ff23d6d631031767260a51578951f39fe9f1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Examples 1-3 (paragraphs [720-20-55-2 through 55-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-2) ) for illustrations of the application of the recognition guidance for claims-made contracts. #### Recognizing a Liability for Incurred but Not Reported Claims ##### [720-20-25-14](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:95cd98b28277b5f7a7967b4fde8b9e852d9b50b744aeed7c0dfabddb681d098b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [450-20-25-2](https://asc.understandingaccounting.org/asc/450/20/#450-20-25-2) requires that insured entities (except as discussed in Section 944-20-15), including those that use a claims-made approach for insuring certain risks, recognize a liability for the probable losses from incurred but not reported claims and incidents if the loss is both probable and reasonably estimable. Paragraphs [450-20-55-10 through 55-17](https://asc.understandingaccounting.org/asc/450/20/#450-20-55-10) provide implementation guidance about litigation, claims, and assessments. ### Multiple-Year Retrospectively Rated Contracts ##### [720-20-25-15](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:29.882Z to 2026-09-10T01:07:29.882Z Record version: sha256:d912902414b168e07af43c8aee3de65b60b50c23086a66cd1669e4dc93694938 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For a multiple-year retrospectively rated insurance contract accounted for as insurance, the insured shall recognize either of the following: 1. a As indicated in paragraph [944-20-25-2](https://asc.understandingaccounting.org/asc/944/20/#944-20-25-2), a liability to the extent that the insured has an obligation to pay cash (or other consideration) to the insurer that would not have been required absent experience under the contract 2. b As indicated in paragraph [944-20-25-2](https://asc.understandingaccounting.org/asc/944/20/#944-20-25-2), an asset to the extent that any cash (or other consideration) would be payable by the insurer to the insured based on experience to date under the contract. Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:9863f1c53eca0254cf50d54fa7c2c04344b08d79b7daa2311be837b7261770b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/720/20/#30-initial-measurement) SEC content: no ##### [720-20-30-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:f3a1c3d675830ba39b54bd0ddc13f4f7581ef1a7743e5bc5900db9c5e5942c65 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Subtopic 340-30 and Section 720-20-25 for measurement guidance on deposit accounting for payments to insurance entities that may not involve transfer of risk. ### Claims-Made Contracts #### Liability for Incurred but Not Reported Claims Based on the Cost of Tail Coverage ##### [720-20-30-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:17bde3b8a1863500b666d37f46ac9f7a7403767f33ca86d4bdf1108a98b59daa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The estimated cost of purchasing [tail coverage](https://asc.understandingaccounting.org/glossary/t/#tail-coverage "Insurance designed to cover malpractice claims incurred before, but reported after, cancellation or expiration of a claims-made insurance policy.") is not relevant in determining the loss to be accrued because paragraph [210-20-45-1](https://asc.understandingaccounting.org/asc/210/20/#210-20-45-1) prohibits netting the insurance receivable against the claim liability. However, if the insured entity had the unilateral option to purchase tail coverage at a premium not to exceed a specified fixed maximum, then the insured entity could record a receivable for expected insurance recoveries (after considering deductibles and policy limits) for the portion of the [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") liability that is insurable under the tail coverage. In that case, the entity would need to record as a cost the expected premium for the tail coverage. The purchase of tail coverage does not eliminate the need to determine if an additional liability should be accrued because of policy limits or other factors. ### Multiple-Year Retrospectively Rated Contracts ##### [720-20-30-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:f891e9d557c1ddac5ff2a5261e4223a431cca2e80bfdda009e5690b76e61a3dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For a multiple-year retrospectively rated insurance contract accounted for as insurance, the amount recognized in the current period shall be computed using a with-and-without method, as the difference between the insured's total contract costs before and after the experience under the contract as of the reporting date, including costs such as premium adjustments, settlement adjustments, and impairments of coverage. The amount of premium expense related to impairments of coverage shall be measured in relation to the original contract terms. Future experience under the contract (that is, future losses and future premiums that would be paid regardless of past experience) shall not be considered in measuring the amount to be recognized. ##### [720-20-30-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-30-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:31.940Z to 2026-09-10T01:07:31.940Z Record version: sha256:aec4f6c66eb8f70643fbedd8cbd03666860ef17257010359f6b4abb9c8b9fe80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the insured could terminate the contract before the end of its term and if termination would change the amounts paid (for example, if terminating the contract would cost less than continuing the contract in force), the liability resulting from the contract shall be measured as follows: 1. a If a decision to terminate has been made, the measurement shall be based on an assumption of termination and on experience to date. 2. b Otherwise, the measurement shall be based on the lesser of the following: 1. 1 The total incremental amount that would be paid based on the with-and-without calculation assuming experience to date and assuming termination (that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date) 2. 2 The total incremental amount that would be paid based on the with-and-without calculation assuming experience to date and assuming no termination (that is, excluding the effects of future losses and future premiums that would have been paid regardless of experience to date). Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:3cff17b9ea0c6be7efa17080cc88b689c47054ddc109e8c12b35849a2caab684 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/720/20/#35-subsequent-measurement) SEC content: no ##### [720-20-35-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:ca5a6dcfa671455d14f35ea75f2adb40a2a87845c341d37bc99fc047be538493 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Subtopic 340-30 for measurement guidance on deposit accounting for payments to insurance entities that may not involve transfer of risk. ### Retroactive Contracts #### Deferred Gain Amortization ##### [720-20-35-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:550bdaf17398cb77cdd5d3e93d21ac08185186e6fe40ac89ed11aa3fdd0bb5e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the amounts and timing of the insurance recoveries can be reasonably estimated, the deferred gain shall be amortized using the interest method over the estimated period over which the entity expects to recover substantially all amounts due under the terms of the insurance contract. If the amounts and timing of the insurance recoveries cannot be reasonably estimated, then the proportion of actual recoveries to total estimated recoveries shall be used to determine the amount of the amortization. ### Claims-Made Contracts #### Interim Financial Reporting—Entity's Fiscal Year and Policy Year Coincide ##### [720-20-35-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:c47907a12ee500beac891371c508a87cb80d7ab49493a25dbcb4a3bb68c7e656 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the entity's fiscal year and policy year coincide, an appropriate method to recognize expense is through a combination of any of the following: 1. a Accruing the [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") liability 2. b Accruing any expected increase in insurance recoverables 3. c Amortizing the insurance premium on a pro rata basis over the year. In addition, the liability for any unusual claims or incidents, as well as any applicable insurance recoverable related thereto, would be recognized in the interim period in which they become known. ##### [720-20-35-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:bda655ef0bcb6c8b0917865b57bc6197a3d8d6530c8d564b572458154f0d979b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For interim reporting, the approach treats usual recurring losses as integral to annual reporting, and, therefore, any expected changes in the incurred but not reported liability and related insurance recoverables that are not related to specific events can be spread over the entire year. However, material unusual losses shall be accounted for as discrete items and recognized as they occur. The approach discussed in this Subsection assumes the recurring purchase of a claims-made insurance policy with a one-year term and the payment of premiums on the first day of each policy year. ##### [720-20-35-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:9ce674e217da573404c381920da17447210ce845ad11be7aaf4758d5e994f590 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the entity's fiscal year and policy term coincide, the year-end incurred but not reported liability relates to the entity's obligation for claims and incidents that have been incurred prior to year-end but will be reportable after year-end. The approach for accounting by policyholders who purchase claims-made insurance policies that consist of prospective provisions is as follows: 1. a The premium paid at the beginning of the fiscal year for the new claims-made insurance policy shall be recognized as a prepaid expense. 2. b At the beginning of the fiscal year, the entity shall estimate its incurred but not reported liability as of the end of the fiscal year. That estimate involves estimating the claims and incidents that will be incurred prior to year-end but will not be reportable until after year-end. Presumably the estimated year-end incurred but not reported liability would approximate the beginning incurred but not reported liability adjusted for relevant historical patterns unless the entity has identified new factors (such as a major change in products, manufacturing processes, or risk management systems) that warrant further adjustment of the ending incurred but not reported liability. 3. c The entity shall compute an estimated annual expense as the sum of all of the following: 1. 1 The premium paid for the claims-made policy 2. 2 The difference between the beginning incurred but not reported liability and the estimated year-end incurred but not reported liability 3. 3 The difference between the beginning insurance recoverable related to the incurred but not reported liability and the estimated ending amount. That estimated annual expense shall be recognized in interim periods based on the methodology that best reflects the manner in which the benefits of the insurance coverage are consumed and the incurred but not reported liability is incurred. In addition, liabilities for specific claims incurred during the year that are not included in the incurred but not reported estimate shall be recognized as expense in the interim period in which they are incurred. The method selected shall be appropriate in light of the relevant facts and circumstances and consistently applied. 4. d The estimated year-end incurred but not reported liability shall be reviewed whenever interim financial statements are prepared. Routine adjustments to the estimated liability shall be recognized ratably in each of the remaining interim periods. However, if events and circumstances in that interim period indicate that unusual claims and incidents have been incurred prior to the end of the interim period, the entity shall recognize in that interim period any related significant adjustments of the estimated year-end incurred but not reported liability. 5. e For any insurance recoverable recognized, either related to the incurred but not reported liability or to a specific incurred claim, the entity shall evaluate those assets and adjust them, if necessary, based on changes in circumstances. See paragraphs [410-30-35-8 through 35-11](https://asc.understandingaccounting.org/asc/410/30/#410-30-35-8) for further guidance on the recognition of a receivable for expected insurance recoveries. 6. f Any unusual claims and incidents that have been incurred prior to the end of an interim period but will probably be reported prior to year-end should not affect net income if they will be covered (insured) under the existing claims-made insurance policy. However, both the asset (under the insurance claim) and the liability (for the incident) shall be reflected on the balance sheet. ##### [720-20-35-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:8102c16815d9e261fb7f582427e99f69149fd133e37d03b15f2fc6713fc370fc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See the [Claims-Made Contracts](https://asc.understandingaccounting.org/asc/720/20/#45-other-presentation-matters) Subsection of Section 720-20-45 for guidance on offsetting insurance assets and liabilities. ##### [720-20-35-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:ef0ef1abc707eeeb6405db4bde1f8b870cb61837f519d6dd9ded644311a8819d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 4 (paragraph [720-20-55-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-13)) for illustrations of the application of the subsequent measurement guidance for interim financial reporting when an entity's fiscal year and policy year coincide. #### Interim Financial Reporting—Entity's Fiscal Year and Policy Year Do Not Coincide ##### [720-20-35-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:4d336440f28007e5a232fc004acba9273413925c3fbc7522ece82c414bb97b6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the entity's fiscal year and policy year do not coincide, the insurance premium component of expense in interim periods could be based on the estimated premium for claims-made coverage that the entity expects to be able to acquire later in the fiscal year. ##### [720-20-35-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:2d5936ca9b964fca2c1d7e88f0528ba9b911be43fa2a52cf8a72d2a6e8e23e57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When the entity's fiscal year and policy term do not coincide, an entity shall recognize all of the following elements at year-end: 1. a An incurred but not reported liability related to the entity's obligation for claims and incidents that have been incurred prior to year-end but will be reportable after year-end 2. b An insurance recoverable for any outstanding claims that are reimbursable under the existing claims-made policy 3. c An asset for prepaid insurance premiums related to the coverage for claims and incidents that will be incurred after year-end but reported prior to the expiration of the existing claims-made policy. ##### [720-20-35-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:7bf93744f9c5f6d8165c6fb0d5ae7739d5485b64743453d61565fa88823a0193 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The approach for accounting by policyholders who purchase claims-made insurance policies that have terms of duration that do not coincide with the entity's fiscal year is as follows: 1. a At the beginning of the fiscal year the entity shall make an estimate of its future premium cost of the new claims-made policy that is expected to be purchased during the fiscal year. The entity shall also estimate the portion of that future premium cost that would relate to coverage for claims and incidents that will be incurred after the end of the fiscal year but reported prior to the expiration of that new claims-made policy; that portion represents the estimated prepaid asset at the end of the fiscal year. The estimate of the future premium cost involves estimating the effect of past claims and incidents that are expected to affect the premium level, as well as the effect of historical patterns and any new factors (such as a major change in products, manufacturing processes, or risk management systems) that are relevant. 2. b At the beginning of the fiscal year the entity shall make an estimate of its incurred but not reported liability as of the end of the fiscal year. That estimate involves estimating the claims and incidents that will be incurred prior to year-end but will not be reportable until after the year-end. Presumably the estimated year-end incurred but not reported liability would closely approximate the beginning incurred but not reported liability adjusted for relevant historical patterns unless the entity has identified new factors (such as a major change in products, manufacturing processes, or risk management systems) that warrant further adjustment of the ending incurred but not reported liability. 3. c The entity shall compute an estimated annual expense as the sum of all of the following: 1. 1 The balance of the premium cost for the claims-made policy expiring during the year 2. 2 The estimated future premium cost for the new claims-made policy 3. 3 The difference between the beginning incurred but not reported liability and the estimated year-end incurred but not reported liability 4. 4 The difference between the beginning and estimated ending insurance receivable related to incurred but not reported liability. That estimated annual expense should be recognized ratably in interim periods based on the methodology that best reflects the manner in which the benefits of the insurance premiums are consumed and the incurred but not reported liability is incurred. As indicated in paragraph [720-20-35-5(c)](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-5), the method selected should be appropriate in light of the relevant facts and circumstances and consistently applied. In addition, liabilities for specific claims incurred during the year that are not included in the incurred but not reported estimate shall be recognized as expense in the period in which they are incurred. 4. d The estimated year-end incurred but not reported liability should be reviewed whenever interim financial statements are prepared. Routine adjustments in the estimated liability (such as adjusting the estimated future premium cost to reflect actual) would be recognized ratably in each of the remaining interim periods. However, if events and circumstances in that interim period indicate that unusual claims and incidents have been incurred prior to the end of the interim period, the entity shall recognize in that interim period any related significant adjustments of the estimated year-end incurred but not reported liability. 5. e For any insurance recoverable recognized, either related to the incurred but not reported liability or to a specific incurred claim, the entity should evaluate those assets and adjust them, if necessary, based on changes in circumstances. Paragraphs [410-30-35-8 through 35-11](https://asc.understandingaccounting.org/asc/410/30/#410-30-35-8) provide further guidance on the recognition of a receivable for expected insurance recoveries. 6. f Any unusual claims and incidents that have been incurred prior to the end of an interim period and that will probably be reported prior to expiration of the new claims-made insurance policy should not affect net income if they will be covered by insurance. However, both the asset (under the insurance claim) and the liability (for the incident) shall be reflected on the balance sheet. ##### [720-20-35-11](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:0243cf84d006d59ea07bea799b3fd998c9c7f5a67eb230f34b575e99451ed577 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See the [Claims-Made Contracts](https://asc.understandingaccounting.org/asc/720/20/#45-other-presentation-matters) Subsection of Section 720-20-45 for guidance on offsetting insurance assets and liabilities. ##### [720-20-35-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:e9a31a727bfbb52be68c491dd02b3ca4f6821cf85484bb94ec2bd06313683793 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 5 (paragraph [720-20-55-20](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-20)) for an illustration of the application of the subsequent measurement guidance for interim financial reporting when an entity's fiscal year and policy year do not coincide. ### Multiple-Year Retrospectively Rated Contracts ##### [720-20-35-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:34.188Z to 2026-09-10T01:07:34.188Z Record version: sha256:d845d7048e5862a5a65cee0eedd15c07a845d010f43558c43726c546c8c861c6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The insured shall account for changes in coverage in the same manner as changes in other contract costs, as indicated in paragraph [944-20-35-2](https://asc.understandingaccounting.org/asc/944/20/#944-20-35-2). For example, the effects of decreases in coverage without a commensurate reduction in premium shall be recognized as a loss by the insured when the event causing the decrease in coverage takes place. Source downloaded (UTC): 2026-09-10T01:07:37.463Z to 2026-09-10T01:07:37.463Z Record version: sha256:c4a2bfe8f21d7a8d458e1073bd46dbd3603933a3b0ba68f340e6dc565115b76f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/720/20/#45-other-presentation-matters) SEC content: no ### Claims-Made Contracts ##### [720-20-45-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:37.463Z to 2026-09-10T01:07:37.463Z Record version: sha256:b165611d1988a4a1b04b5d6aad6265baff6759319ec92ee0437ccf16b4cf8b06 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Unless the conditions of paragraph [210-20-45-1](https://asc.understandingaccounting.org/asc/210/20/#210-20-45-1) are met, offsetting prepaid insurance and receivables for expected recoveries from insurers against a recognized [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") liability or the liability incurred as a result of a past insurable event would not be appropriate. Source downloaded (UTC): 2026-09-10T01:07:40.198Z to 2026-09-10T01:07:40.198Z Record version: sha256:6f9df67821fcd305f2d36078de01d71c008268e40853c327c5ad59d9750120e7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/720/20/#50-disclosure) SEC content: no ### Claims-Made Contracts ##### [720-20-50-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-50-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:40.198Z to 2026-09-10T01:07:40.198Z Record version: sha256:0ba643eafe9a8693d4560df344c7305d0431e67e6b8f8500a9ab220f3f7050b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an entity changes from occurrence-based insurance to claims-made insurance or elects to significantly reduce or eliminate its insurance coverage paragraphs [450-20-50-3 through 50-6](https://asc.understandingaccounting.org/asc/450/20/#450-20-50-3) require disclosure if it is at least reasonably possible that a loss has been incurred. That paragraph also discusses disclosure with respect to unasserted claims. Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:a974c1e17cad033094c7a62de59c80fb620ce00212430334fedbab3296c8e86e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/720/20/#55-implementation-guidance-and-illustrations) SEC content: no ### Claims-Made Contracts #### Illustrations ##### [720-20-55-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:c73e5eefe308baed7da72a74e255d342aa4fe0faef82be86a529019cff39a4d6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 1-3 (see paragraphs [720-20-55-2 through 55-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-2) ) provide illustrations for applying the guidance contained in paragraphs [720-20-25-6 through 25-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-6) . ##### [720-20-55-2](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:e8d25a778cf9df954ca9f2df3ff7438dff7b8d2db5f8de3461dac6ca7d8a45dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates how to assess whether an insurance policy for directors and officers liability contains a retroactive provision. The Example contains the following two Cases: 1. a A policy without a retroactive provision (Case A) 2. b A policy with a retroactive provision (Case B). ##### [720-20-55-3](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:bd4a373271b5b13a5dd7f5d1d0801885c934a3e947732af453af81c2a13ffb12 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity A is a manufacturer that purchases directors and officers insurance under a claims-made insurance policy each year. Entity A immediately reports any asserted claims or incidents that could result in an asserted claim to its insurance carrier. Entity A currently has no knowledge of any unasserted claims against it and is unaware of any event that would result in any claims. Entity A considers the use of a claims-made insurance policy to be the most efficient and least costly method available to manage its insurance risk related to suits against its directors and officers. Entity A pays BrokerCo to handle its insurance needs. BrokerCo supplies Entity A with binding quotes from several insurance carriers and a comparison to binding quotes for other similar entities. Entity A believes that its premiums are comparable to those of other similar entities that have similar insurance risk profiles and no knowledge of any events or circumstances that might result in a claim. Entity A has an option to purchase tail coverage, which would effectively convert its claims-made policies into occurrence-based policies at any time. On January 1, 20X3, Entity A pays its annual premium of $5 million for its policy. The policy has a retroactive date to January 1, 20X0, which is the year that Entity A first started using the claims-made insurance approach with its insurance carrier. Entity A is unable to bifurcate its policy premium into its retroactive and prospective provisions. ##### [720-20-55-4](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:20c51ac521eb6e3fe1ba4d231df2212b1675af3a46818b1bd7d9d39db53fe16a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In June 20X3, there is a precipitous drop in the stock price of Entity A, and a lawsuit is brought against the directors. Entity A notifies its insurer about the asserted claim, and the insurer agrees that those claims are covered by its claims-made policy in effect for 20X3. ##### [720-20-55-5](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:54229a3abeacd54d517fc7adc41536748fa045c46b946adbcbea39b1044f30ff Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an evaluation of the circumstances, Entity A determined in 20X0 that its claims-made insurance policy is a prospective contract that does not contain any retroactive provisions. Essentially, Entity A was unaware of any known events or circumstances that might result in a claim and viewed the premiums paid for its directors and officers insurance as providing coverage against claims that might occur during the policy period. In making its determination that the claims-made insurance policy did not contain a retroactive provision, Entity A also considered the following: 1. a Entity A typically uses a claims-made policy to manage its insurance risk and plans to continue purchasing a claims-made insurance policy annually. 2. b Tail coverage is readily available. 3. c The premium charged for the claims-made policy is not significantly in excess of premiums charged to other similar entities with similar insurance profiles. 4. d The claims-made policy contains an unambiguous contract trigger to determine when claims are covered. 5. e Because Entity A has no knowledge of any asserted claims or events that would result in a claim, the claims-made policy is primarily expected to cover insurance risk related to future claims. ##### [720-20-55-6](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:c2e6dabf3118b74cc0709fe042bfe492d02893bd9a62ceabbe6b51acb9330202 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Case makes the same assumptions as Case A, except that the precipitous drop in the stock price of Entity A occurred in 19X9, prior to the inception of its claims-made insurance program with its insurance carrier. During the negotiation of the contract premium, Entity A discussed its concerns with its insurance carrier, and the two agreed that the retroactive date would include any claims related to the drop in the stock price. As a result, the premium was $50 million. ##### [720-20-55-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:0810e5b5b636e33d1d4a75baae6a6136684c25f79048b927e4127a8c7f24a1c3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an evaluation of the circumstances, Entity A determined in 20X0 that its claims-made insurance policy contains a retroactive provision. Entity A knows that the $50 million premium charged represents the expected costs of settling any claims related to the drop in its stock price, an event that was fully known at the inception of the contract. Entity A disclosed this fact to its insurer, and the two agreed that it might result in a claim and negotiated a premium based on that premise. In making its determination that its directors and officers policy contains a retroactive provision, Entity A also considered the following: 1. a The claims-made policy was taken out in part in response to a known incident that was reported to the insurer. 2. b The premium charged by the insurer includes an estimate of the expected settlement costs for the unasserted claim. 3. c The premium charged primarily represents a financing of the unasserted claim. ##### [720-20-55-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:9c456d2d207355058b5bda682b7b8e350456977ec97281f53489f5836ae173bf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Prior to accounting for the entire contract retroactively, Entity A should, if practicable, bifurcate the contract into its retroactive and prospective provisions and account for each separately. ##### [720-20-55-9](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:224e20d0c1212c101e45ff9e95132973e72e29e2be829acfa3ff9903695c85ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On February 20, 20X2, Entity A determined that it needed to recognize a $100 million liability for environmental contamination as a result of an accident at one of its manufacturing plants. Entity A initially believed that it would manage the cleanup and any lawsuits arising from the accident through an internal self-insurance program. Subsequently, Entity A decided to purchase a claims-made insurance policy that would include all claims arising from the incident. Entity A decided that it should purchase the policy because it would be more efficient to transfer the risk associated with the development and timing of claims to a third party and representing that the risk associated with all claims had been transferred to a third party would reduce the risk profile of Entity A to its shareholders and other potential investors. On April 1, 20X2, Entity A pays InsurerCo $60 million for a claims-made insurance policy. Entity A and InsurerCo expect the claims related to the incident to be settled over a 10-year period after the purchase of the policy. ##### [720-20-55-10](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:74f2bd169c247ffb6fd21fbd44e225c189116da262d8c31183e11dfdb54f0734 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an evaluation of the indicators, Entity A determines that its claims-made insurance policy contains a retroactive provision. In making that determination, Entity A specifically considered the following: 1. a The claims-made policy was purchased specifically to cover known claims for which a liability had been recognized. 2. b The claims-made policy effectively represented a financing of the liability previously recognized by Entity A. 3. c The premium charged was primarily based on expected payouts for an event that had already occurred. ##### [720-20-55-11](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:7fb2c475d93dd8dc0be2e694b216c7b47874b856f40372f012abb9a3aeee99a0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. HealthCo is a health care provider that purchases medical malpractice insurance in order to manage its insurance risks. HealthCo purchases a claims-made insurance policy each year from its insurance carrier. HealthCo would be able to purchase tail coverage from its insurance carrier if it chose to do so. Although HealthCo has no knowledge of any asserted or unasserted claims against it, HealthCo estimates and recognizes a liability for claims [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity.") of $25 million at December 31, 20X2, based on actuarial reviews of its historical claims reporting and payment patterns. HealthCo engages an insurance brokerage entity to ensure that its insurance premiums are consistent with those offered to similar entities with similar insurance risks. During 20X2, HealthCo paid out $95 million of malpractice claims that were fully covered by its insurance program. On January 1, 20X3, HealthCo pays its annual premium of $100 million for its claims-made policy. HealthCo expects that it will require a liability of $29 million on December 31, 20X3. The policy does not cover incidents occurring prior to the inception of the claims-made insurance program with that insurance carrier. In negotiating its policy with InsurerCo, HealthCo asserts to InsurerCo that it is unaware of any specific, current claims (asserted or unasserted) against it. ##### [720-20-55-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:488b80f12e480dae68b9fd53504eda504699e0ea6aaf53fa64f674bd88a40a2d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Based on an evaluation of the indicators, HealthCo determines that its claims-made insurance policy is a prospective contract that does not contain any retroactive provisions. In making that determination, HealthCo specifically considered the following: 1. a There are no known asserted or unasserted claims that are expected to be covered by the policy. The liability recognized for incurred but not reported claims would not preclude HealthCo from concluding that its claims-made insurance policy is prospective as HealthCo represented that it did not know of any asserted claims. 2. b Tail coverage is readily available. 3. c The premium charged for the claims-made policy is not significantly in excess of premiums charged for similar policies with no retroactive dates. 4. d There is a clear and unambiguous contract coverage trigger. ##### [720-20-55-13](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:b25e956465b0d8c4955338680fa51ccbfce78ce1914d56d3b2f7c122d1a28d4b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example provides illustrations for applying the guidance contained in paragraphs [720-20-35-3 through 35-7](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-3) . This Example contains the following Cases: 1. a Calculations are made using assumed facts (Case A). 2. b The entity revises its incurred but not reported estimate (Case B). 3. c The entity discovers a defect in the manufacturing process (Case C). ##### [720-20-55-14](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:661c10bd41e5e07c4195c0a33e6d9d3eb19e249fbca88aa37a22c3d09fc176cb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A, B, and C illustrate how to calculate various required amounts (for example, the expected annual insurance expense, the expected quarterly insurance expense, the incurred but not reported liability, the known claims liability and the prepaid insurance) under each Case's different circumstances. Cases A, B, and C share all of the following assumptions. 1. a Entity A purchases claims-made policies every year for its insurable risk. The insurance arrangement meets the criteria for prospective treatment as described in paragraphs [720-20-25-7 through 25-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-7) . The policy has a $500,000 per incident deductible and a $2 million per incident maximum with a policy limit of $15 million. When calculating the insurance recoverable related to incurred but not reported incidents, Entity A assumes that approximately 50 percent of the gross claim value will be recovered because of the deductible. Entity A does not anticipate incurring any losses in excess of the policy's maximums. 2. b Accrued incurred but not reported liability at 12/31/X0: $2 million. 3. c Receivable for insurance recoverable at 12/31/X0: $1 million. 4. d Estimated incurred but not reported liability at 12/31/X1: $2.2 million. 5. e Estimated receivable for insurance recoverable at 12/31/X1: $1.1 million. 6. f Premium for claims-made policy for year ending 12/31/X1, payable 1/1/X1: $1.6 million. 7. g Value of claim for an incident reported during the second quarter (the claim is covered by the insurance policy subject to a $500,000 deductible and was both paid to the claimant and recovered from the carrier during the third quarter): $750,000. - ![](https://asc.understandingaccounting.org/asc-img/GUID-E1A2AB68-D413-4AC6-862D-15F8A90EF01D-low.gif) Computations (in thousands): Expected annual expense = annual premium + expected increase in IBNR liability - expected increase in insurance recoverable = "$1,600 + ($2,200 - $2,000) - ($1,100 - $1,000)" = "$1,600 + $200 - $100" = "$1,700 " Expected quarterly expense = "$1,700 ÷ 4 = $425" IBNR: Incurred but not reported ##### [720-20-55-15](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:d21ec0e7fd3c67241a10a20d9c11ef5132beef83041c0f977ed605d8eaba2eed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates computation of quarterly insurance expense. - ![](https://asc.understandingaccounting.org/asc-img/GUID-F5991464-DAF7-49A6-BDAB-29AF4C846622-low.gif) INBR liability (a) (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $(2,000)" " $(2,050)" " $(2,100)" " $(2,150)" Add: accrual (b) -50 -50 -50 -50 "Balance, end of quarter" " $(2,050)" " $(2,100)" " $(2,150)" " $(2,200)" Known claims liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" $- $- $(750) $- Add: claims made - (750) - - Less: claims paid - - 750 - "Balance, end of quarter" $- $(750) $- $- Prepaid insurance (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" $- " $1,200 " $800 $400 Add: premium payments made " 1,600 " - - - Less: amortization (c) (400) (400) (400) (400) "Balance, end of quarter" " $1,200 " $800 $400 $- Insurance recoverable (d) (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $1,000 " " $1,025 " " $1,300 " " $1,075 " Add: Expected recoveries 25 275 25 25 Less: Recoveries received - - (250) - "Balance, end of quarter" " $1,025 " " $1,300 " " $1,075 " " $1,100 " Quarterly expense (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 Amortization of prepaid insurance $400 $400 $400 $400 Accrual of IBNR liability 50 50 50 50 Accrued claims reported - 750 - - Accrued insurance recoveries (25) (275) (25) (25) Total expense $425 $925 $425 $425 IBNR: Incurred but not reported (a) "Paragraph 210-20-45-1 provides additional guidance on when the legal right to setoff exists and should be used to determine whether prepaid insurance (or insurance recoverable) and a recognized incurred but not reported liability (or the claim liability incurred as a result of a reported event) may be offset. Such offsetting would not be appropriate unless the conditions of that paragraph are met. For income statement purposes, however, the expenses related to claims reported and the income related to insurance recoverables may be offset." (b) Straight-line accrual of the incurred but not reported liability is assumed for purposes of simplicity but would only be appropriate if management expects that the underlying incurred but not reported claims covered by the insurance arrangement would occur evenly throughout the year. See paragraphs 720-20-35-3 through 720-20-35-7. (c) Straight-line amortization of the prepaid insurance premium is assumed for purposes of simplicity only. See paragraph 720-20-35-5. (d) Paragraphs 410-30-35-8 through 410-30-35-11 provide further guidance on the recognition of a receivable for expected insurance recoveries. ##### [720-20-55-16](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:9ca4c0183a877ab440ad5e34c2409a31efe1a044648d236a4c75455bb84a0ae2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case Entity A revises its estimated year-end incurred but not reported liability from $2.2 million to $2.6 million in the second quarter due to overall increases in settling claims, which is considered a routine adjustment by management, and Entity A determines that a reasonable matching of the additional cost to the periods benefited results in recognizing one-half of the adjustment in the second quarter and the remainder of the adjustment over the remaining interim periods on a pro rata basis. ##### [720-20-55-17](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:9bd2e19cdd131446124dd56b7d2c2140b95aebc81fdabe5bb133ebe5481d6a13 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates computation of quarterly insurance expense. - ![](https://asc.understandingaccounting.org/asc-img/GUID-4AA0FA58-9BF8-4A14-B668-65B87AB25E0A-low.gif) IBNR liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $(2,000)" " $(2,050)" " $(2,300)" " $(2,450)" Add: accrual (50) (250) (150) (150) "Balance, end of quarter" " $(2,050)" " $(2,300)" " $(2,450)" " $(2,600)" Known claims liability (in thousands): Same as Example 5. Prepaid insurance (in thousands): Same as Example 5. Insurance recoverable (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $1,000 " " $1,025 " " $1,400 " " $1,225 " Add: Expected recoveries 25 375 75 75 Less: Recoveries received - - (250) - "Balance, end of quarter" " $1,025 " " $1,400 " " $1,225 " " $1,300 " Quarterly expense (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 Amortization of prepaid insurance $400 $400 $400 $400 Accrual of IBNR liability 50 250 150 150 Accrued claims reported - 750 - - Accrued insurance recoveries (25) (375) (75) (75) Total expense $425 " $1,025 " $475 $475 IBNR: Incurred but not reported ##### [720-20-55-18](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:c7af91617db3ea439c0ca48ba3636cea08b9aefdd0c52eb44b777aea85d99899 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case Entity A discovers a defect in the manufacturing process in the third quarter and corrects it. Entity A evaluates whether its incurred but not reported liability warrants adjustment and concludes that an additional $2.1 million liability is needed for claims that are expected to be reported after year-end. Entity A considers the discovery of the defect to be an unusual event and determines that a reasonable matching of the additional cost to the periods benefited results in the entire adjustment being recognized in the third quarter. ##### [720-20-55-19](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:31078c7d02a6cb95a8477fe1e0bc490bd4f8978f5cdce9f95b0d654a2518be2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table illustrates computation of quarterly insurance expense. - ![](https://asc.understandingaccounting.org/asc-img/GUID-97F03D22-524B-4CBB-83AA-520C4F511E5F-low.gif) IBNR liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $(2,000)" " $(2,050)" " $(2,300)" " $(2,450)" Add: accrual (50) (250) (150) (150) "Balance, end of quarter" " $(2,050)" " $(2,300)" " $(2,450)" " $(2,600)" Known claims liability (in thousands): Same as Example 5. Prepaid insurance (in thousands): Same as Example 5. Insurance recoverable (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $1,000 " " $1,025 " " $1,400 " " $1,225 " Add: Expected recoveries 25 375 75 75 Less: Recoveries received - - (250) - "Balance, end of quarter" " $1,025 " " $1,400 " " $1,225 " " $1,300 " Quarterly expense (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 Amortization of prepaid insurance $400 $400 $400 $400 Accrual of IBNR liability 50 250 150 150 Accrued claims reported - 750 - - Accrued insurance recoveries (25) (375) (75) (75) Total expense $425 " $1,025 " $475 $475 IBNR: Incurred but not reported ##### [720-20-55-20](https://asc.understandingaccounting.org/asc/720/20/#720-20-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:42.295Z to 2026-09-10T01:07:42.295Z Record version: sha256:309f28e4ebc4be3a3a81e4ac21d1ed94226d75eb7f534f9a7260a4a21319453a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example provides an illustration for applying the guidance contained in paragraphs [720-20-35-8 through 35-12](https://asc.understandingaccounting.org/asc/720/20/#720-20-35-8) . This Example has the following assumptions: 1. a Entity A purchases claims-made policies every year for its insurable risk. The insurance arrangement meets the criteria for prospective treatment as described in paragraphs [720-20-25-7 through 25-8](https://asc.understandingaccounting.org/asc/720/20/#720-20-25-7) . The policy has a $500,000 per incident deductible and a $2 million per incident maximum with a policy limit of $15 million. When calculating the insurance recoverable related to incurred but not reported incidents, Entity A assumes that approximately 50 percent of the gross claim value will be recovered because of the deductible. Entity A does not anticipate incurring any losses in excess of the policy's maximums. 2. b The policy period runs from May 1 to April 30, and uses a December 31 year-end for financial reporting purposes. 3. c Accrued incurred but not reported liability at 12/31/X0: $2 million. 4. d Receivable for insurance recoverable at 12/31/X0: $1 million. 5. e Estimated incurred but not reported liability at 12/31/X1: $2.2 million. 6. f Estimated receivable for insurance recoverable at 12/31/X1: $1.1 million. 7. g Premium for one year claims-made policy expiring 4/30/X1: $1.2 million. 8. h Estimated premium for one-year claims-made policy commencing 5/1/X1: $1.8 million. 9. i Value of claim for an incident reported during the second quarter (the claim is covered by the insurance policy subject to a $500,000 deductible and was both paid to the claimant and recovered from the carrier during the third quarter): $750,000. - ![](https://asc.understandingaccounting.org/asc-img/GUID-2548C0DC-D98E-4181-B680-E37BBA159B13-low.gif) Computations (in thousands): Expected annual expense = premium costs + expected increase in IBNR liability - expected increase in insurance recoverable = " {\[$1,200 × (4/12)\] + \[$1,800 × (8/12)\]} + ($2,200 - $2,000) - (1,100 - 1,000) " = " ($400 + 1,200) + $200 - $100 " = "$1,700 " Expected quarterly expense = " $1,700 ÷ 4 = $425 " IBNR: Incurred but not reported - ![](https://asc.understandingaccounting.org/asc-img/GUID-8957FB30-351E-4E55-89DD-09B477E704B6-low.gif) INBR liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $(2,000)" " $(2,050)" " $(2,100)" " $(2,150)" Add: accrual (50) (50) (50) (50) "Balance, end of quarter" " $(2,050)" " $(2,100)" " $(2,150)" " $(2,200)" Known claims liability (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" $- $- $(750) $- Add: claims made - (750) - - Less: claims paid - - 750 - "Balance, end of quarter" $- $(750) $- $- Prepaid insurance (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" $- " $1,200 " " $1,400 " $400 Add: premium payments made " 1,600 " - - - Less: amortization (400) (400) (400) (400) "Balance, end of quarter" " $1,200 " $800 $400 $- Insurance recoverable (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 "Balance, beginning of quarter" " $1,000 " " $1,025 " " $1,300 " " $1,075 " Add: Expected recoveries 25 275 25 25 Less: Recoveries received - - (250) - "Balance, end of quarter" " $1,025 " " $1,300 " " $1,075 " " $1,100 " Quarterly expense (in thousands): Qtr 1 Qtr 2 Qtr 3 Qtr 4 Amortization of prepaid insurance $400 $400 $400 $400 Accrual of IBNR liability 50 50 50 50 Accrued claims reported - 750 - - Accrued insurance recoveries (25) (725) (25) (25) Total expense $425 $925 $425 $425 IBNR: Incurred but not reported Source downloaded (UTC): 2026-09-10T01:07:45.379Z to 2026-09-10T01:07:45.379Z Record version: sha256:69034ca22bebb11d5ac50bb35c0ef55de33fe545c5ff09e91a4f2fbb1b679ea3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 720-20-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/720/20/#60-relationships) SEC content: no ### Claims-Made Contracts #### Health Care Entities ##### [720-20-60-1](https://asc.understandingaccounting.org/asc/720/20/#720-20-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:07:45.379Z to 2026-09-10T01:07:45.379Z Record version: sha256:b5307743a8786c4343b2402c08911db2ca11e7366dd4b15fdfbc9714674fb33b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on the recognition of a liability for claims [incurred but not reported](https://asc.understandingaccounting.org/glossary/i/#incurred-but-not-reported "Losses incurred by the insured entity that have not yet been reported to the insurance entity."), see paragraph [954-450-25-2](https://asc.understandingaccounting.org/asc/450/954/#450-954-25-2).